Microsoft: Brand Facelift Or Real Change?

Microsoft's naming of Satya Nadella at its new CEO signals a new era at Microsoft. Or does it? Bill Gates is coming back to "help" at the behest of Mr. Nadella. Even though Gates is stepping down from his position as Chairman of the Board, he will be spending at least 1/3 of his time at Microsoft HQ and remain on the Board as will Steve Ballmer, whom Nadella replaces as CEO. Therefore, is this a shuffling of the deck chairs, or will it really represent a new era of innovation at Microsoft as the CEO promises? Whether this change represents a serious attempt to turn around a very large ship or an effort to appease stockholders that have seen Microsoft's stock languish in neutral, time will tell. At the very least, the management change represents a brand facelift that is badly needed in the wake of Ballmer's tenure as CEO.

Brand benefits

Looking at the positive aspects of this change, Nadella, largely unknown outside of Microsoft's inner circles where he has worked for 22 years, enables Microsoft to position the change as something new. Nadella has already said the focus will be on innovation, which is a breath of fresh air after the Ballmer era where the market viewed Microsoft as a dinosaur that focused on protecting its legacy products - Windows and Office, and failed to achieve success in social media, search, and mobile. Also, for those that are nervous that Nadella is an unknown "brand" that lacks CEO experience, Bill Gates is back on the management team. Gates is himself a world-renowned brand that is largely associated with Microsoft's founding and its "go-go" days when the company stock experienced "hockey-stick" growth.

The other side of the coin

On the other hand, with Gates on the Management team and both Ballmer and Gates remaining on the Board, some are wondering whether this is, in fact, a move toward true innovation or just more of the same. It reminds the skeptics in the marketplace of the time when Medvedev was President of Russia while Vladimir Putin was pulling his strings and blaming Medvedev for everything that did not work. The reality is that this move to install Nadella as the CEO could go either way.

Was Microsoft ever really innovative?

Those in the know also wonder if Microsoft under Gates and Ballmer was ever innovative. Many believe that Microsoft never really invented anything. PCDOS or MSDOS was really a re-write of a purchased operating system. Windows got its inspiration from the Mac, which improved on the idea invented at Xerox PARC. Excel was an improvement on VisiCalc and SuperCalc with perhaps an assist from Lotus 1-2-3. Word borrowed heavily from WordPerfect, Wordstar, and Wordpal. When it had little or no formidable competition, Gates and Microsoft watched the market, and if a product took off, they improved on it, and put large resources behind marketing it to dominate the market. That worked well before Apple, Google and Facebook became formidable (and more innovative) competitors.

The boy who cried wolf

Under Steve Ballmer, the marketplace grew tired of Microsoft's chest thumping. At Microsoft's Worldwide Partner Conference, Steve Ballmer declared war on Apple. Per the Washington Post, he said, "We are trying to make absolutely clear we are not going to leave any space uncovered to Apple…" This all sounded good, but the war never presented a serious threat to Apple or Google. While Microsoft is a very powerful and profitable company with enormously talented people and a lot of money in the bank, it has failed to challenge Google's dominance in search, Apple's profitability in mobile devices, or Facebook's, Twitter's and Linked In's dominance in their respective corners of social media.

Cultural impediments

Many believe that Microsoft is so big and bureaucratic that it does not have what it takes to compete with Apple and Google, which are big companies that act more like start ups. Dick Brass, a former Microsoft Vice President, wrote an Op-Ed piece in the New York Times several years ago that says of the Microsoft culture…"it has created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence. It's not an accident that almost all the executives in charge of Microsoft's music, e-books, phone, online, search and tablet efforts over the past decade have left."

The big question

The question that many have on their minds is "Can Mr. Nadella really innovate in spite of the cultural and other barriers that have made it difficult for Microsoft to change the direction of its very large ship - especially with Bill Gates in the house and Ballmer and Gates on the Board?" Time will tell. Good luck to Microsoft and all those that would like to see Microsoft become truly competitive in new markets again.

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